Used EV salary sacrifice scheme launched to help manage decline in RVs

A used electric vehicle (EV) salary sacrifice scheme has been launched by Tusker to protect a dramatic decline in residual values (RVs).

Used plug-in stock is being supplied through its own risk fleet when cars come to the end of their existing contract or are subject to an early termination.

The move comes after used EV values have fallen by half (50%) over the past 24 months, with Fleet News revealing how leasing companies, with large plug-in fleets, have been exposed to the losses.

Trade body the British Vehicle Rental and Leasing Association (BVLRA) has warned that the UK’s vehicle leasing and rental industry is facing an “existential threat”, because of the collapse in used EV values. 

How much EV portfolios have been starting to bite as vehicles are defleeted in greater numbers has been illustrated in the financial performance of some leasing companies.

In February, vehicle leasing giant Ayvens reported a 22.2% drop in pre-tax profits year-on-year, down from £1.42bn to £1.1bn. Figures suggested a £341 million year-on-year decline in used car sales, with Ayvens blaming falls in RVs.

Zenith’s annual financial results, for the year ending March 31, 2024, published in July, showed turnover was £788.4m, up 16.1% year-on-year, from £679m the previous year. However, adjusted gross profit was £134.4m, down 8.5% year-on-year, from £147m.

The figures revealed that its average termination profit per vehicle was down 40% year-on-year as a result of weak used vehicle prices both for BEV and ICE vehicles.

Finally, in August, Tusker’s sister company Lex Autolease, also part of the Lloyds Banking Group, reported that its pre-tax profits had plummeted by more than £400m. 

It posted a pre-tax profit of £124.4m for 2023, a dramatic fall on the £544.2m reported for 2022.

The fall in profits came despite Lex Autolease’s revenue increasing over the same 12 months from £2 billion to £2.2bn as new vehicle supply improved.

Blame, in part, was levelled at lower profits on the disposal of vehicles “due to market conditions” and increased interest expense on its borrowings.

In an effort to mitigate losses, several leasing companies have launched used car leasing products, with the BVRLA reporting in a recent Road to Zero report that demand was up 7.7% for used EV leases.

Kit Wisdom, managing director of Tusker, told Fleet News that its secondhand EV salary sacrifice scheme is initially being launched with just five businesses from its 2,500-strong customer base, before being rolled out more widely.

It is expected to be live with 50 customers by the end of October.

Wisdom (pictured above) said: “We see that as real growth area for us, particularly around making sure we’re able to access and address our all of our eligible employees in a better way.”

He expects a used sal/sac lease could be anywhere up to 20% cheaper. “It really depends on the make, the model and what the cost of a new car is at that particular moment in time, but that's really exciting for us,” he added.

The used EVs are marketed through an online platform in the same way its new cars are offered via salary sacrifice, with employees able to see the appropriate cost based on different terms and mileage.  

Wisdom explained: “We’re refurbishing the cars, we put them on to the site and are treating them very much like a new stock car.”

Sal/sac popularity illustrated in risk fleet growth

The salary sacrifice specialist is reporting another incredible year of growth, with its risk fleet pushing beyond 52,000 – a 58% increase on the 32,842 vehicles reported in FN50 2023. 

This follows a similar year-on-year rise from 2022, when its risk fleet stood at 22,132 vehicles.

Wisdom says the growth illustrates the growing popularity of salary sacrifice. “Our customer base is growing and getting bigger, because the product’s interesting to benefit leads, and payroll and HR teams,” he explained. 

“We’ve seen the really large corporates go live, with the likes of Siemens, through to the SME customer base as well.”

But he added: “Public sector is still heartland. It’s still really important to what we do; we’re the lead (salary sacrifice provider) on a number of different frameworks for the public sector and we’re really proud about that.”

The buying power of Lloyds, which operates its retail vehicle finance company Black Horse and fleet leasing giant Lex Autolease alongside Tusker, has also enabled it to soften the blow of rental increases, keeping product competitively priced, helping to drive growth.

Lloyds Banking Group acquired Tusker for £300m in February 2023, with Tusker taking the lead on new sal/sac prospects received by Lex Autolease, but existing customers remaining on its books.

Wisdom says that 77% of Tusker's risk fleet is made up of battery electric vehicles (BEVs), with year-to-date orders slightly higher at 79% BEV, while plug-in hybrids (PHEVs) account for 15% of its orders.

“As more PHEVs have come to market that are eligible for 5% BIK (benefit-in-kind tax) you start to see them take a greater share within the order bank,” he added.

He explains that, with hybrids being typically cheaper than a fully-electric car, it enables the leasing company to offer product that’s attainable by more employees, much like its used salary sacrifice scheme.  

Longer replacement cycles

Tusker has also launched a longer replacement cycle of five years (60 months) for its salary sacrifice cars. “That’s come from collaboration within Lloyds Banking Group,” explained Wisdom. “Lex has offered five-year leases for years, so they have the data, while we have never wanted to operate in the marketplace.”

However, he said: “A longer lease is really fundamental to keeping lease costs down and to giving drivers certainty, so we launched the new product in July.

“About 10% of our orders in July were for 60-month contracts and I think it’s gone to 11% in August. That’s a really powerful product for us, and I appreciate it’s just a tweak on an existing product, but it’s really quite a powerful tweak.”

Currently, its average replacement cycle on its risk fleet stands at 42 months, but Wisdom expects that to lengthen as more employees choose a 60-month term.

Tusker leadership changes

Wisdom was appointed managing director of Tusker, in January 2024, after CEO Paul Gilshan decided to step down and join the board as a non-executive director.

Several changes to its senior leadership team were then made in June 2024, with Steve Barker stepping down from his role as chief commercial officer.

Alison Argall was promoted to the role of business development and customer retention director, while Jodie Monaghan was appointed as Tusker’s new operations director having been with the business for almost nine years.